Mitchells & Butlers PLC
24 September 2003
24 September 2003
MITCHELLS & BUTLERS PLC
PRE CLOSE PERIOD TRADING UPDATE
Mitchells & Butlers today announces that the Company has continued to improve
its like for like sales trends and traded overall in line with expectations
during the 51 weeks to 20 September 2003. The Company will be announcing its
Preliminary Results for the year to 27 September 2003 on 4 December 2003.
During the second half, the improvement in like for like sales has been driven
by the success of our sales and marketing activity and good weather. We have
made further gains in productivity, realised planned overhead reductions and
made good progress with selective disposals for alternative use.
Invested like for like sales (i.e. same outlet) have grown by 2.0% in the 19
weeks since 10 May 2003, the date to which we last reported. Like for like
sales in those businesses which have not benefited from investment since the
start of the previous financial year were down 0.1%. This is a 3.6 percentage
point improvement on the trend reported for the first 32 weeks of the year. The
70% of the estate in residential areas has achieved 3.3% like for like sales
growth (1.2% on an uninvested basis). Although trading conditions in the High
Street and central London remain difficult, there has been some recovery with
uninvested like for like sales down 2.7%.
In the year to date, total sales grew by 1.7% and sales in those businesses
which have not benefited from investment were down 2.5%.
During the second half, we have, as planned, invested gross margin to drive
sales volumes and gross profits. Our sales and marketing activity has focused
on improving consumer choice by extending the drinks range and evolving the
menus, combined with competitive pricing and additional training in service and
selling skills.
The mix benefits of improved range and further purchasing gains have largely
offset the cost of the additional promotional investment, leaving gross margins
broadly unchanged for the year as a whole.
In the second half, we have continued to make improvements in staff productivity
which has risen by 5% due to investment in training and scheduling systems and,
as planned, £5m of overhead savings were realised which will result in an
annualised saving of £10m.
We are on target to complete 135 conversions in the year, driving strong
incremental investment returns. The phasing of investment projects has reduced
our forecast capital expenditure to around £150m for the year, whilst our
success in realising selective site disposal opportunities will generate some
£50m. As a result, net capital expenditure for the year is expected to be around
£100m.
Refinancing Update
We have made excellent progress with the securitisation process and we expect to
commence marketing in October. We are on track to return at least £400m of
surplus funds to shareholders. It is our intention that such a return would be
made by way of a special dividend accompanied by a consolidation of the number
of shares in issue.
On an FRS 17 basis, the net pension liability at 12 April 2003 was £174m. As
part of the securitisation process, the Company has agreed with the Trustees to
accelerate cash contributions to the pension plans over the next three years by
£55m in total. After tax, the net cash outflow is estimated to be £38.5m. This
is in addition to the £9.5m still to be paid in connection with the de-merger.
2004 Guidance
The success of our sales generation programme has reinforced our confidence in a
strategy of margin reinvestment. The continuation of the second half sales and
marketing activity means that average retail prices net of promotions for 2004
are expected to be around 1% lower than the current year. We intend to continue
with new trials and, based on their success, we will roll out additional
activity on a controlled basis to drive sales and profits further.
We estimate that the increase in the National Minimum Wage to £4.50 in October
this year, will cost the business £10m. In addition, we anticipate increases in
property rates, insurance and pensions costs of £7m.
To mitigate these pressures on margins, we will continue to focus on achieving
staff productivity, purchasing and mix gains as well as benefiting from the full
year effect of the support cost savings.
For further information please contact:
Investor Relations
Kate Holligon 0121 498 5092
Media
Bob Cartwright 0121 498 4298
Jeremy Probert 0121 498 5547
Finsbury Group - James Murgatroyd 020 7251 3801
There will be a conference call for analysts and fund managers at 9.30am hosted
by Tim Clarke, Chief Executive. Please call 020 7162 0183. The replay will be
available for one week on 020 8288 4459.
Cautionary note regarding forward-looking statements
This update contains certain forward-looking statements as defined under US law
(Section 21E of the Securities Exchange Act of 1934). These forward-looking
statements can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements often use words such as
"target", "expect", "intend", "believe" or other words of similar meaning. By
their nature, forward-looking statements are inherently predictive, speculative
and involve risk and uncertainty. There are a number of factors that could cause
actual results and developments to differ materially from those expressed in or
implied by such forward-looking statements. Factors that could affect the
business and the financial results are described in Item 3 Key Information -
Risk Factors in the Mitchells & Butlers plc Form 20-F filed with the United
States Securities and Exchange Commission on 28 March 2003.
This information is provided by RNS
The company news service from the London Stock Exchange